Furnished rentals represent a unique segment of the rental market, offering advantages and challenges distinct from traditional unfurnished leases. Real estate professionals working with investors, landlords, and tenants should understand how these properties function, the legal and financial implications, and market demand trends.
Market Demand and Target Audience
The demand for furnished rentals varies by location and property type. In urban centres, corporate executives, contract workers, and relocating professionals often seek fully furnished accommodations for short-term stays. University towns attract students looking for convenience, while tourism-heavy regions see demand from vacationers.
To better support clients, it’s important to monitor local trends and recognize seasonal fluctuations. This allows you to pinpoint high-demand areas or neighborhoods for furnished properties, or advise clients with existing properties in these locations to consider transitioning their rentals to furnished units.
Switching Leasing Models
Many Canadian cities have introduced restrictions on short-term rentals (STRs), causing many investor owners to consider moving away from STRs. While many owners then believe their only option is to move to long-term, unfurnished rentals, there is a key missing middle leasing model that can be lucrative.
Mid-term rentals, typically defined as leases lasting three to twelve months, are often exempt from STR restrictions but may still be subject to local tenancy laws. There can be good demand for this in-between type of rental, appealing to executives, relocating employees, and other high-quality tenants looking for temporary accommodations and the convenience of furnished homes.
Clients should, however, be aware of provincial tenancy legislation. In most provinces, tenants who stay for 30 days or longer are protected under standard residential tenancy laws, making it more difficult for landlords to remove them compared to short-term guests. Real estate professionals must ensure that landlords understand the implications of these regulations.
Financial and Tax Implications
Furnished rentals often generate higher rental income than unfurnished units, but they also come with additional costs. Investors should budget for furniture, utilities, internet, and maintenance expenses, all of which can cut into profitability. On the positive side, there are potential tax advantages. In Canada, investors may be able to claim these additional costs as expenses, potentially reducing taxable income. This includes deductions for depreciation on furniture and appliances. Real estate professionals should encourage clients to consult tax professionals to ensure proper reporting and compliance.
Furnishings and Operational Considerations
The quality and style of furnishings can impact rental appeal and occupancy rates. High-quality, durable furniture and a neutral design aesthetic tend to attract a broader range of tenants, helping property owners reduce periods of vacancy, as well as allowing them to charge higher rents.
Maintenance expectations for furnished rentals are higher than for unfurnished properties. Frequent tenant turnover means more wear and tear on furnishings, requiring regular replacements and deep cleaning. Landlords may also need to replace broken furniture due to emergencies and unforeseen circumstances;
Real estate professionals should strongly consider recommending professional property management services for clients operating in furnished rentals, especially those managing multiple units, to ensure smooth day-to-day operations and maintain high standards. This helps ensure attractive, comfortable, and practical furniture pieces are chosen, to actively contribute to the appeal and value of your property. They can also help clients find quality furniture that will last to reduce maintenance and replacement costs over time.
Marketing
High-quality, well-styled furnishings can significantly enhance a rental property’s marketability, making it more appealing to potential tenants and increasing its competitive edge. The right furniture and décor help create inviting, functional spaces that align with the expectations of the target demographic. Listings should highlight the convenience and lifestyle that a furnished rental can offer, with high-quality photos and engaging, active descriptions.
Partnering With Furnishing Services
For real estate professionals, building partnerships with reliable furnishing services can be a valuable asset.
A professional furnishing service ensures properties are set up quickly and attractively, helping set the stage for marketing to attract quality tenants. It also streamlines the process of getting properties rental-ready for marketing
Partnering with a trusted furnishing service enables you to confidently refer clients in need of furnishing solutions. This strengthens client relationships by demonstrating your ability to offer practical, time-saving solutions while positioning you as a knowledgeable and resourceful advisor in the furnished rental sector.
Helping Clients Navigate the Furnished Rental Market
Real estate professionals should help investors assess the viability of furnished rentals by analyzing potential returns, factoring in operational costs, and ensuring compliance with local regulations. For landlords transitioning from long-term to furnished rentals, professionals should highlight both the benefits and additional responsibilities.
Providing expert market insights and advising clients on portfolio diversification into furnished rentals can strengthen trust-based relationships, setting you apart as a knowledgeable industry expert. Staying informed on market trends, legal considerations, and financial implications ensures you can guide clients in making informed investment decisions that align with their goals.
Marco Property Management provides expert guidance on furnished rentals to maximize profitability, along with interior design consultations and comprehensive furnishing services, including emergency replacements.
Sara LeBlanc is a real estate professional and furnished division property manager in Toronto.
